Maruti Suzuki Reports 39% Decline In Net Profit in Q2 FY20

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Along with the net profit, the company’s revenue has also declined by 26% in Q2 FY19/20

India’s largest car manufacturer, Maruti Suzuki India Ltd is no stranger to the slump of the automotive industry. The company has reported a decline of 39% in its net profit for the second quarter of FY 2019-20, which stood at Rs 1391.1 crore. A 24.26% decline of total revenue was also reported, which went down from Rs 22,443.9 crore in the same quarter last year to Rs 16,997.9 crore in the current quarter.

Even though Maruti Suzuki continues to dominate the sales charts for passenger vehicles in the country, the sales figures have gone down by 30.2 per cent, as compared to the same period last year. The company managed to sell a total of 338,317 vehicles in this time period, which includes domestic sales of 312,519 units and 25,798 units of exports.

In H1 FY 2019-20, the manufacturer’s net profit saw a decline of 33.7% compared to the same period last year, and stood at Rs 2,794.1 crore, thanks to lower sales volumes, extensive sales promotions and cost reductions, reduction in corporate tax and higher depreciation expenses. Apart from that, Maruti Suzuki’s overall revenue operations also declined 18.2 percent to Rs 36,705.1 crore in the given period.

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Even after two important launches, including the premium MPV, XL6 and the mini SUV, S-Presso in the said period, the company only managed to sell a total of 740,911 cars, which is 24% less compared to H1 FY 2018-19. The net sales were registered at Rs 34,855.6 crore, which also went down by 19.6%.

The manufacturer offered its highest ever discounts this year, in order to try to boost sale volumes. Maruti Suzuki claimed that it gave out an average discount of Rs 25,761 on each car sold during the second quarter of FY 2019-20. It is yet to be seen if Maruti Suzuki would stick to its earlier statement that the hefty discounts will go down post-Diwali.

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Ajay Seth, CFO, Maruti Suzuki, said, “If demand continues to be weak then obviously discounts will continue. It is a chicken and egg situation. All of us have the surplus capacity and if we don’t utilise it then we are sitting on a huge fixed cost overhang. So, we have to choose between the devil and the deep sea.”